Richard Cowart: Protecting our safety net hospitals is imperative

Feb. 5, 2014

File / Newscom

Written by

Dick Cowart

For The Tennessean

Recently, in a rare showing of bipartisanship, the entire 11-member Tennessee congressional delegation signed a letter requesting that CMS Administrator Marilyn Tavenner support the approval of a Medicaid waiver from the State of Tennessee authorizing an additional $80 million in essential access hospital funding.

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The health care world is full of acronyms, which to the unschooled can appear as foreign as Egyptian hieroglyphics.

In the world of health care finance, the letters DSH have a special and significant meaning. DSH stands for disproportionate share hospital, and it is the saving grace for many safety net hospitals and academic medical centers. Because these hospitals treat a high number of patients who are poor and dependent upon public assistance, they get a special DSH payment to make up for the unique population of patients they serve.

The Medicaid DSH program, established by Congress in 1981, was originally designed to provide extra Medicaid reimbursements for safety net hospitals that treat a disproportionately high number of Medicaid and uninsured patients. States are required to make DSH payments to qualifying hospitals, and the government matches those payments up to a limit for each hospital determined by its eligible uncompensated care (as well as a total statewide limit).

Congress has revised the program many times since its enactment, changing the amount of DSH payments, clarifying the federal match and adjusting the qualifications for hospitals. Under the Affordable Care Act, the federal DSH program was to be gradually phased out, because the ACA intended that the population served would be covered in the future by Medicaid expansion or the new ACA insurance tax credits.

After the Supreme Courtís decision in 2012 that Congress could not require states to expand their Medicaid programs, though, DSH hospitals faced a triple whammy: Medicare cuts, no DSH payments and no new Medicaid patients.

However, since nearly half of the states (including Tennessee) have not expanded their Medicaid programs, Congress recognized the injustice and, in its year-end budget accord, extended the Medicaid DSH program for an additional two years. Absent this action, many safety net hospitals faced significant impairment and perhaps even closure.

The situation is particularly significant in Tennessee.

In 1994, Tennessee began its TennCare program under a special waiver agreement that did not include a DSH program. When TennCare was significantly contracted during the Bredesen administration, DSH payments were replaced with essential access hospital payments. Because of this unique history, Tennessee is now the only state that does not have guaranteed access to DSH funding going forward. In a state where hospitals provided more than $700 million in unreimbursed TennCare costs and $970 million in charity care in 2013, and bore an additional $730 million in Medicare underpayments, DSH and essential access payments really matter.

Recently, in a rare showing of bipartisanship, the entire 11-member Tennessee congressional delegation signed a letter requesting that CMS Administrator Marilyn Tavenner support the approval of a Medicaid waiver from the State of Tennessee authorizing an additional $80 million in essential access hospital funding. Yes, the letter was signed by both Tennessee senators and nine congressmen, both Republicans and Democrats.

The Obama administration is determined to declare the Affordable Care Act a victory, regardless of the consequences. But if the administration does not step up to protecting the nationís safety net hospitals, the most vulnerable populations and their longtime champions may become an early casualty of health reform.

Richard Cowart is chairman of the health law and public policy departments at Baker Donelson. Reach him at dcowart@bakerdonelson.com.